Tag: Options Trades

Another positive month for the options-based portfolio despite another negative month for the markets. A positive $3,372 in income was generated for January 2021. Generating consistent monthly income while defining risk, leveraging a minimal amount of capital, and maximizing return on capital is the core of options trading. Options enable smooth and consistent portfolio appreciation without guessing which way the market will move and allow one to generate consistent monthly income in a high probability manner in both bear and bull market scenarios. Over the past 9-plus months (May 2020 – January 2021), 203 trades were placed and closed. A win rate of 98% was achieved with an average ROI per winning trade of 7.8% and an overall option premium capture of 83% while outperforming the S&P 500. The performance of an options-based portfolio demonstrates the durability and resiliency of options trading to drive portfolio results with substantially less risk. The options-based approach circumvented the September, October, and January sell-offs while outperforming the S&P 500, posting returns of 47.6% and 43.7%, respectively (Figures 1, 2, and 3).

Figure 1 – Overall options-based performance compared to the S&P 500 from May 2020 – January 31st, 2021
Continue reading "Options: Positive Returns Despite Negative Market Returns" →

Wall Street capped off one of the most volatile years in history. The Dow Jones and S&P 500 ended the year at all-time highs, posting returns of 16.3% and 7.3%, respectively, for 2020. At the same time, the Nasdaq posted a return of 43.6% for the year. These unprecedented returns were achieved despite the S&P 500 nosediving over 30% earlier in the year due to the coronavirus pandemic sweeping the world. In this market environment harnessing options can allow traders to define risk, leverage a minimal amount of capital, and maximize returns.

All-time highs have been reached with the confluence of election certainty, improving vaccine prospects across the globe, and massive stimulus out of Washington. These positive developments have been priced into the markets. The broader indices are richly valued as measured by virtually any historical metric via stretched valuations, options put/call ratios, broad participation above 200-day moving averages, and elevated P/E ratios. Collectively, these may be potential warning signs of near-term pressures. Heeding these frothy market conditions via risk mitigation may be best served with risk-defined options trading.

Options: Margin of Protection and Defining Risk

Harnessing options in frothy markets allows one to define risk, leverage a minimal amount of capital, and maximize returns. Options can be structured to allow a margin of downside and/or upside stock movement while collecting income in the process. In these richly valued markets, allowing a margin of downside and/or upside stock movement may be a great strategy to heed potential market volatility. Continue reading "Leveraging Options To Navigate Frothy Markets" →

At the core of options trading is defining risk, leveraging a minimal amount of capital, and maximizing return on capital. Options enable smooth and consistent portfolio appreciation without guessing which way the market will move. Options allow one to generate consistent monthly income in a high probability manner in both bear and bull market scenarios. Over the past 8-plus months (May-December), 186 trades were placed and closed. A win rate of 98% was achieved with an average ROI per winning trade of 7.7% and an overall option premium capture of 82% while matching returns of the broader market and outperforming during market downswings. An options-based portfolio's performance demonstrates the durability and resiliency of options trading to drive portfolio results with substantially less risk. The risk mitigation element is particularly important, considering markets are richly valued as measured by any historical metric (Figures 1 and 2).

Figure 1 – Overall option metrics from May 2020 – December 31st, 2020
Continue reading "8 Months, 186 Trades and 98% Options Win Rate" →